The Avengers: Who’s Gonna Pay for That?

As some have already noted, the damage done to Midtown Manhattan in The Avengers could easily top $160 billion, all told (here’s the original source of that estimate).

That’s a lot of money. By comparison, as the link notes, the total impact of the September 11th attacks was about $83 billion and Hurricane Katrina cost about $90 billion. This is about as much as the two of those put together.

So… who’s gonna pay for all that?

Well, we talked about this subject generally back in December 2010, and the analysis has changed little since then. But The Avengers gives us a chance to apply those general principles to a particular set of facts.

I. Insurance Policies

The obvious first place to look would be the various property owners’ insurance policies. This is going to run into immediate problems. One is reminded of the insurance dispute surrounding the September 11 attacks. Larry Silverstein, the new lessee of the World Trade Center, argued that each of the plane collisions represented a separate “occurrence” under the policy, essentially doubling his potential claim. A federal court, after a jury trial, decided that was largely not true, also dealing with issues raised by the fact that the contracts hadn’t been fully completed at the time of the loss, and recovery was capped at $4.55 billion, less than the $7-odd billion Silverstein had originally sought. So in light of that precedent, it seems that the entire battle would be treated as a single “occurrence” for the purposes of insurance.

But the bigger problem is that this loss may be excluded entirely. Insurance policies have pretty much always included exclusions for war and civil unrest, and in the aftermath of September 11, the federal government enacted the Terrorism Risk Insurance Act, Pub. L. 107–297, 116 Stat. 2322, as a sort of statutory, federal reinsurance mechanism funded both by policy premiums and the Treasury, to assist insurers in meeting their obligations in the event of a designated act of terrorism.

Thing is though, this doesn’t obviously seem to be an act of “terrorism,” which is defined in the statute to mean an act which causes loss of life or property damage “as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.” This doesn’t seem to be what Loki and the Chitauri were up to. They just wanted to conquer the world. So the Treasury, State Department, and Attorney General might decide, between them, that this wasn’t really an act of “terrorism” for the purposes of the Act, and refuse to certify it. There would certainly be a lot of political pressure exerted on them in an attempt to make the insurers pay.

The linked article is wrong about one thing though: whether or not the loss is considered an “act of God” is irrelevant. We talked about this back in our post on Thor, where we noted that “act of God” provisions are typically part of contracts other than insuring agreements, because insuring agreements are specifically intended to cover what would count as “acts of God,” i.e., lightning strikes, floods, fires, etc. Regardless, the incident still implicates the war/terrorism exclusion(s), so there’s likely no coverage.

II. S.H.I.E.L.D.

If S.H.I.E.L.D. can at all be considered part of the federal government’s “military forces,” then S.H.I.E.L.D. and its agents (i.e. the Avengers themselves) are entirely immune from civil suits. Why? Because the Federal Tort Claims act specifically excepts “Any claim arising out of the combatant activities of the military or naval forces, or the Coast Guard, during time of war.” 28 U.S.C. § 2680(j).

So two questions. First, does S.H.I.E.L.D. count as part of “the military or naval forces”? Second, is this a “time of war”?

As to the first, we talked about S.H.I.E.L.D.’s potential status on Monday. We concluded that while the way the entity is portrayed is somewhat ambiguous, the best solution seems to be classifying it as a US entity with international participation rather than an international entity with US participation. In that case, it’s almost certainly part of “the military forces,” as it’s hard to conceive of this being under anything but the Pentagon. Even if it were like the Coast Guard, which is normally under the Department of Homeland Security, it shifts to the Department of Defense during wartime.

But even if it were an international organization, the way these things typically work is that agents aren’t answerable to the international group directly, they’re merely loaned from national forces. The most obvious analog is UN Peacekeeping forces, which are composed entirely of contributions by member states. Exactly how liability for this works is pretty murky. Here’s an article discussing some of these issues with respect to some of the Peacekeeping activities in Haiti. The US, as we’ve seen, is already immune from suit, so there’s no joy there. But the UN’s liability is generally limited by treaty to that of its member states. Otherwise you could have a situation where a member state misbehaved but is immune under its own laws and the rest of the member states have to pick up the tab. Not gonna fly. So as it turns out that no matter how you slice this, S.H.I.E.L.D. is going to be immune as long as this is “time of war.”

Which it probably is. As discussed above, calling this “terrorism” and not “war” is going to be a pretty tough sell. Loki and the Chitaurans were trying to conquer the entire world, not to affect US domestic or international policy or get the civilian population to do much of anything. Which looks a lot more like “war” than “terrorism.” But we could wind up with the rather hilarious prospect of the State Department sending a message to Asgard, asking Thor to produce Loki for questioning on his motives for the invasion. Regardless, the fact that it really was an invasion, not just a bomb plot, is going to make this look a lot like war, and it seems plausible that a district court could reach that conclusion pretty quickly.

In short: S.H.I.E.L.D., and the federal government generally, aren’t obviously on the hook to pay for this. It seems likely that Congress would pass an act specifically directed at paying for this disaster, something it’s allowed to do, but it wouldn’t be liable for the damages in court.

III. Conclusion

Really, the only way this is getting paid for is if the government and/or private actors decide to pony up, essentially out of the goodness of their hearts. One can see Tony Stark being fairly generous here (or just using the opportunity to buy a lot of desirable real estate on the cheap), and it seems impossible that Congress wouldn’t come up with at least some funds here. One interesting idea would be to declare all of the alien tech salvaged to be the property of the federal government, which would, in turn, dedicate revenues from the research and sale of such tech to go towards the rebuilding of New York and then saved for other such disasters. But it would take specific statutory action to make that work.